Number of gas stations in Canada continues to decline

    Annual study also reveals a drop in outlets affiliated with integrated
    refiner-marketers, lack of growth in the "big box" sector

    CALGARY, July 13 /CNW/ - The number of retail gasoline outlets in Canada
continues to decline, according to a recently released annual survey of retail
gasoline facilities by petroleum consultancy MJ Ervin & Associates Inc.
    The annual study, entitled the National Retail Gasoline Site Census 2006,
is the only comprehensive enumeration of the number of retail gasoline
stations in Canada. It identified a total of 13,772 retail gas stations as of
December 31, 2006; a continuation of a downward trend in the number of retail
gasoline stations in Canada since 1989, when over 20,000 retail outlets
existed. The 2006 outlet count represents 4.2 gas stations for every 10,000
persons in Canada.
    This trend reflects an average decline of about two percent per year,
over a period of time when Canada's population, and its economy, have been
steadily growing. "This is a consequence of a lack of profitability in the
retailing of gasoline", states Michael Ervin, the president of MJ Ervin &
Associates. Despite significant profits in the oil industry in general, the
retail sector has been a poor performer: in 2006, the wholesale "rack" to
retail markup on a litre of regular gasoline was only five cents per litre at
a typical urban gas station, according to pump price statistics gathered by MJ
Ervin & Associates.
    Ervin notes that to be profitable, outlets must sell high volumes of
gasoline in order to compensate for the low margins. They must also be
effective marketers of pop, chips, car washes, and other non-petroleum
offerings that tend to have much higher margins than gasoline. "It's the
stations that lack sufficient fuel sales or sufficient non-petroleum sales
that are closing", Mr. Ervin adds.
    The study reveals that growth in "big box" retailers of gasoline such as
Safeway and Wal-Mart, has stalled in the past few years. This category of
petroleum marketer had proliferated in western Canada over the past decade,
but had only seen limited growth in eastern Canada. The study suggests that a
combination of low profit potential and some regulatory constraints may be
responsible for limiting big box retailers from further expansion in the
future.
    The percentage of retail outlets affiliated with refiners declined from
49.5 in 2005 to 46.2 in 2006, evidence of a likely strategy of refiners
divesting marginal performing retail assets. Conversely, non-refiner marketers
(sometimes referred to as "independent" marketers) were affiliated with
53.8 percent of all outlets in 2006, compared to 50.5 percent in 2005.
    As to the all-important question of who controls the retail pump prices
at Canada's 13,772 gas stations, the study determined that 16 percent of
gasoline stations are price-controlled by one of the three "major" oil
companies (Imperial Oil, Petro-Canada, or Shell), while over two-thirds of
gasoline outlets are price-controlled by dealers or companies who are not
involved in the refining of petroleum products.
    The MJ Ervin & Associates report paints a picture of the diversity of
gasoline brands, with over 98 different brand names under which gasoline is
sold in Canada, although most of this country's gasoline originates from 16
refineries, operated by ten refining companies. There are over 66 companies
involved in the retail management of these brands.

    The National Retail Gasoline Site Census is a research project of MJ
Ervin & Associates Inc. A copy of the report can be downloaded free of charge
at www.mjervin.com.

    MJ Ervin & Associates Inc. (MJEA) is a Calgary-based consultancy
specializing in the petroleum refining and marketing industry. Our clients
span a wide range of government, NGO and industry organizations with an
interest in downstream petroleum issues. A full description of our consulting
expertise is available on our web site.

For further information: Michael J. Ervin at (403) 283-8704 ext 101, or
Cathy Hay at (403) 283-8704 ext 102